PROJECT TITLE: BUILDING A NORTHEAST REGIONAL GOAT DAIRY SUPPLY CHAIN
The purpose of this grant was to fund the framework for a robust supply chain of fresh goat milk in the Northeast. Eurial, the $3 billion French Food Entity, had announced their desire to purchase 1.6 million lbs. of milk annually, given their recent acquisition of a large cheese production facility in NY’s Hudson Valley. Eurial has been importing frozen curd from France, then repackaging the chevre in retail or wholesale packs, but the Company has no supply of fresh milk available.
There were four specific objectives of the grant:
- Establishment of a cooperative structure for the benefit of the future farms that would supply Eurial
- Creation of a genetics pool that would ultimately improve the availability of dairy goats with spotless health records, and verifiable records of superior milk production
- Assessment of and recommendations for a satisfactory contractual arrangement with the milk buyer that would be equitable for the seller
- Development of a “whole enterprise” dairy goat farm business model that would facilitate professional investment and accommodate demands of conventional lenders
The outcome of those initiatives, in summary, is as follows:
Cooperative Sellers Structure
A coop type entity has been established as a New York State LLC, “Hudson Dairy Group.” The Operating Agreement pursuant to which all management matters will be subject, calls for voting pro rata to the amount of milk each member provides. This approach is equivalent to what Cornell Cooperative refers to as the “new type coops” in which larger suppliers influence the outcome of substantive decisions, a feature which is essential in attracting large professional dairy farms. Eurial has a stated a clear preference for suppliers with herds of over 500 goats. This arrangement, while cooperative in principle, accommodates dairies with the greatest economic stake.
The advantage of a cooperative structure in principle is the democratic allowance for each voice to be heard, and each vote to be treated equally. These same features are troublesome to the larger dairies who feel that the economic interests of large farms are not identical to those of smaller farms. Because Eurial is convinced that only large farms are suited for their professional supply chain, we have established an entity, “Hudson Dairy Group” that will sell in unison to Eurial, but management will be out-sourced to the holding company, Hudson Goats, LLC. At the outset, Hudson Goats, LLC will, through its “Home Farm,” be the first and only supplier in the Hudson Valley. As other farms are initiated, they will be able to join the Dairy Group, which will be a forum for all concerns that affect goat dairies in general, thereby satisfying the concerns of small farms as well.
The genetics pool in the US is limited and weak; improvement is potentially difficult due to the inadequacy of records, the limited number of professional breeders, and the prevalence of disease in many herds. APHIS will allow importation of genetic material from countries that comply with stated protocols, but to date, only New Zealand has demonstrated its ability/willingness to do so. We have made arrangements with a genetics breeding service in New Zealand that is prepared to source excellent genetics for us when recipient does have been purchased. We have examined the farms with prospective donor bucks and reviewed the quarantine farm from which embryos would be sourced. The records of health compliance with APHIS standards have been reviewed by an independent geneticist in New Zealand.
All necessary arrangements have been made to acquire frozen semen and/or embryos from the most reputable supplier in New Zealand. It is our hope that we will also be able to persuade Eurial to fund the procedures required by APHIS to import dairy goat genetics from Europe as well, but at this juncture, no protocols have been financed. It is apparent that there are dairy animals with milking capacity of greater than 40% above the US average; acquisition of these genetics would accelerate herd improvement in the US by many years. A Goat Genetics Research Center has been established to own recipient does and begin the process of breeding up with a sophisticated EBV data base.
Contractual Arrangements with Milk Buyer
Eurial has stated its willingness to be party to a five-year Take or Pay Agreement, and our lawyers have prepared a thorough draft for the company’s comment. It is based on an exhaustive review of other contractual arrangements between sellers and buyers of milk in the US, Europe and Asia. Without the detailed clauses of this contract, it is doubtful investor funds could be raised to acquire the assets for the “Model Farm” that is to be built as the cornerstone of the Northeast Dairy Goat supply chain.
Our lawyer has drafted the Take of Pay Agreement that would obligate Eurial to purchase a defined amount of milk over a period of five years, with a clause that enables them to reduce that amount by 25% per annum with adequate notice. At this juncture, should it occur, the Seller is allowed to supply others with milk as well. Currently there is a shortage of raw goat milk in the States, but this imbalance cannot be counted on to prevail indefinitely. It is essential to professional investors that there be security supporting their equity, as they would be unwilling to speculate on the possibility that the milk might be sold; it must be sold in advance.
Whole Enterprise Concept
It is the unfortunate custom of many, if not most, large goat dairy operations, in Europe, New Zealand and the US, to dispose of young male goats, (bucklings) born to the milking does. Not only is this practice unacceptable in the public’s perception, it is a lost profit opportunity. Minimizing the costs of raising these meat animals, and establishing relationships with ethnic buyers, who already are purchasing imported goat meat, is an essential element in driving a whole enterprise model to profitability. Currently the US imports approximately 1.5 million pounds of frozen goat meat weekly, largely from Australia and NZ. It is our expectation that a portion of that amount could be displaced with locally grown animals.
While the import of goat meat into the US continues to grow, there is no integrated structure for sale of goats and no established sellers as there is in the case of dairy cows. We believe that it is essential to develop the
meat market and raise the bucklings in a facility where focus is entirely on developing good meat animals. We propose to buy the bucklings for a small but fair price from each farm that is part of the Hudson enterprise; a separate meat farm facility will then grow them out for the cabrito (small goat) buyers and the less lucrative chevon (larger animal) market. We are now in touch with the three slaughterhouses in or near the Hudson Valley that will perform halal slaughter, a process which is responsive to the market requirements. The dairy farms will receive a dividend check from the sale of the meat after feed and other overhead costs have been deducted. Not only does this remove the burden of raising bucklings from the dairy farm, it allows the dairymen to participate in the profits of meat sales. It is anticipated that in due course, the meat component of the integrated enterprise will equal or exceed profits from milk sales.
Prospective Growth of Hudson Dairy Goat Project
At the close of 2015, Hudson Goats, LLC was awarded a New York State grant of $75,000 to expand the goat genetics initiative. Eurial was awarded slightly over $1 million to build out their existing plant to accommodate the receipt of local milk and the production of fresh cheeses. The award of these competitive grants is a significant vote of support from State government in seeing goat dairying become a lucrative undertaking for agriculturalists in the Hudson River Valley and other parts of New York and the Northeast.